Evergreen Clause
An evergreen clause is a contractual provision that automatically renews an agreement for a subsequent term unless one of the parties provides written notice of termination.
What is an Evergreen Clause?
An evergreen clause is a provision within a contract that stipulates the automatic renewal of the agreement for successive periods unless one of the parties actively provides notice of termination. This type of clause ensures that the contract retains its validity and continues without the need for renegotiation after the initial term. It is commonly found in ongoing service agreements, such as subscriptions or leases, where continuous service or usage is desired.
The primary purpose of an evergreen clause is to streamline the contract renewal process, eliminating the tedious and time-consuming effort of manual renewals. It provides stability and continuity to the contractual relationship, requiring an explicit action, typically a notice of termination, to stop the renewal cycle. The clause usually specifies the duration of each renewal period and the conditions for renewal, often renewing automatically without any additional action from the parties involved.
What is the difference between an Evergreen Clause and Automatic Renewal Clause?
An evergreen clause and an automatic renewal clause both ensure a contract continues for successive periods without active renegotiation. The core similarity is the automatic continuation of the agreement. The key difference lies in the explicit requirement of an active termination notice to stop the renewal cycle, which is a defining characteristic of an evergreen clause.
An evergreen clause specifically requires one party to actively provide a notice of termination to stop the automatic renewal, whereas an automatic renewal clause generally implies renewal without requiring any explicit action to continue.
Evergreen clauses often detail the conditions and duration of each renewal period, emphasizing the continuous nature until explicitly terminated.
While an automatic renewal clause simply states the contract will renew, an evergreen clause highlights the provision designed to actively maintain the agreement's validity and continuity without renegotiation.
What are examples of an Evergreen Clause?
A gym membership that automatically renews monthly unless the member cancels prior to the billing date.
A software subscription service that automatically renews annually unless the user opts out before the renewal date.
A lease agreement for a commercial property that automatically extends for another year if neither the tenant nor the landlord gives notice of termination within a specified window.
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